Philly casino applicants face background scrutiny

Sunday

Dec 16, 2012 at 3:18 PMDec 16, 2012 at 3:20 PM

PHILADELPHIA (AP) — After initial review of the six applications for Philadelphia's second casino license, the state gaming board has identified more than 50 main players associated with the projects and that number is expected to grow as the proposals move forward.

Now begins the extensive process of conducting background checks on all of those people, who have been deemed to have either direct or indirect influence on the companies that would pay for and run the casinos, to make sure they are suitable.

"We're really looking just to make sure that things are in actuality as things are presented by the applicant," said R. Douglas Sherman, the board's chief counsel. "We don't want to see instances of corruption, which may have permeated gambling in the 1950s. We don't want that in Pennsylvania."

So far, the board has identified 54 people associated with the applicants whom it has deemed "principals." Each must be licensed and undergo extensive background checks and financial reviews.

The board identifies principals as anyone who meets one of nine criteria. That includes officers; directors; people who directly hold a "beneficial interest in or ownership of" the securities of the applicant or anyone who owns a controlling interest; anyone who has the ability to elect a majority of the board of directors of a licensee or to otherwise control a licensee.

Additionally, it includes lenders and other financial groups behind an application, as well as underwriters, trustees and those who "have the ability to control the management of investment funds." Finally, there is a catch-all designation of other persons "deemed to be a principal" by the board.

In identifying principals, Sherman said, the board's Bureau of Licensing starts by identifying officers, lenders, people with ownership stakes, trusts that may be set up and other lending structures and agreements.

Then, the materials go to the board's Bureau of Investigations and Enforcement, which looks closely at financing and corporate structures, conducts background checks and looks for others who could exert influence on the applicant. The bureau looks for holes or gaps in financing and examines account ledgers and expenditures to see who is being paid.

"We're looking at whether there are any players behind the scenes that are not the face of the project," Sherman said.

The BIE looks at factors that could bear on character, honesty and integrity, Sherman said, interviewing friends, neighbors, prior employers and others.

In 2009, then-casino owner Louis DeNaples was charged with perjury for allegedly lying to casino regulators about his relationship with reputed mob boss William D'Elia. The charges against DeNaples were dropped with the condition he relinquish control of the casino, Mount Airy Casino Resort.

The board won't discuss specifics of that case, the most infamous in the state's eight-year-old gambling history. But Paul Mauro, the BIE's director, said in a statement that investigators learn from every case.

"No applicant and no investigation is alike," he said. "Therefore, we learn lessons from every investigation we conduct because each applicant is unique, therefore making us better regulators and investigators in gaming matters."

All of the information collected goes into consideration when the board determines if an applicant meets the suitability requirements. There is then a new round of checks that begin once an applicant wins a license.

People on both sides say it's in the applicant's best interest to be straightforward, so the process goes smoothly.

Applicants typically know to be open, said Robert Russell, a consultant with Regulatory Management Counselors, a company that works with applicants in Michigan, California, New York and other states.

"In this industry, as advanced as we are, there's no hiding the ball here," Russell said. "The days of unknown ownership of the 1930s of Vegas just are gone."

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